Writing your Life Assurance Policy in Trust

Why bother about writing your
life assurance policy in a trust? For one, this will protect the proceeds
against huge taxes. Also, this ensures that the life insurance proceeds go
directly to your trustees which are then responsible for giving the proceeds to
the beneficiaries.

There are times when, due to
some unforeseen circumstances (such as the original beneficiaries passing away
before the insured), the proceeds of the life assurance policy goes into the
insured’s estate. When this happens, the life assurance proceeds will be
subject to inheritance tax. Inheritance tax is a whopping 40% of the estate
value for amounts exceeding £300,000 (for an individual) and £600,000 (for
couples). Also, when the proceeds go into your estate, there is the danger that
the amount will be reduced by the estate’s existing debt.

Taking out life assurance in
order to protect your loved ones from financial loss resulting from your death
is a wise decision. But you should also provide one more layer of protection by
writing your policy in trust.

The trust also has an added
advantage of enabling faster payouts of the insurance proceeds. This is because
putting the estate on probate, reading the will and distributing the assets can
be a long and drawn out affair. This can mean that while your family may need
money to pay for hospital bills and funeral and burial expenses, they can’t get
access to the life assurance proceeds.

And the thing is, it is quite
simple to have your policy written in trust. You simply need to inform your
life insurance agent about your desire to do so. Most insurance companies will
provide this added service at no extra charge. If you’re also buying the policy
off the internet, you also just need to tell the seller the same thing. Now, if
your financial situation is more complicated, you may need the help of an
attorney in writing up the trust.

The drawback is that you must
name the trustees that you trust entirely. You can also name the specified
beneficiaries when you write the trust. You also need to re-appoint trustees if
your selected trustee predecease you.